Northumbrian Water confirms takeover approach from Chinese group

Northumbrian Water shares edged up 4.3p (1 per cent) to 420p this morning as it confirmed Chinese group Cheung Kong Infrastructure Holdings has signalled takeover intentions.

Cheung Kong is owned by Li Ka-shing, Hong Kong's richest man, and analysts have said a bid could value the British utility group at up to £2.6billion.

Other water groups' stocks perked up on the coat tails of the speculation - Severn Trent with a 12p boost (0.8 per cent) to 1,484, and United Utilities up 3.5p (0.6 per cent) to 602.5p.

Cheung Kong had said earlier this
week it might make an offer, and Northumbrian shares had risen 9 per
cent since, valuing the company at £2.2billion.

But Northumbrian would not comment on
the value of CKI's proposal. Analysts have said CKI could end up paying
450p-500p per share.

A rise in inflation this year, from
which British water utilities are shielded through regulated returns,
has increased the appeal of such companies to infrastructure investors
seeking the safety of predictable, long-term cash flows.

Northumbrian shares have often risen
on speculation its largest shareholder, Ontario Teachers' Pension Plan
with a 27 per cent stake, could make an offer.